Financial markets across Europe and Asia exhibited a predominantly bearish trend during light holiday trading, reacting to heightened geopolitical tensions. China’s initiation of military exercises around Taiwan served as the primary catalyst for investor caution, despite the island’s benchmark Taiex index posting a 0.9% gain.
European indices opened with modest declines: Germany’s DAX slipped 0.2% to 24,296.81, while France’s CAC 40 remained virtually unchanged at 8,100.83. London’s FTSE 100 similarly showed minimal movement at 9,874.80. U.S. futures indicated a soft opening, with S&P 500 futures down 0.2% and Dow Jones futures trading flat.
The Chinese military characterized its combined forces drills as a strategic warning against what it termed ‘separatist forces’ and ‘external interference.’ Taiwan responded by placing its military on high alert and accusing Beijing of being ‘the biggest destroyer of regional peace.’ These developments followed Beijing’s expression of displeasure regarding recent U.S. arms sales to Taiwan and remarks from Japanese Prime Minister Sanae Takaichi concerning potential defensive involvement.
Commodity markets witnessed significant movements with gold retreating 1.3% to $4,494 per troy ounce and silver declining 2.3% to $75.40, despite both metals having reached record levels recently due to supply constraints and safe-haven demand. Analysts attributed the precious metals’ volatility to changing expectations regarding Federal Reserve interest rate policies and China’s implementation of new export licensing systems for silver effective January 1st.
Oil markets rebounded strongly with U.S. benchmark crude advancing $1.13 to $57.87 per barrel and Brent crude gaining similarly to $61.37, recovering from Friday’s losses exceeding 2.5%. The dollar weakened slightly against the yen to 156.30 while the euro strengthened to $1.1779.
Regional performance varied considerably with South Korea’s Kospi jumping 2.2% to 4,220.56, nearly matching its November record, driven by substantial gains in SK Hynix (6.8%) and Samsung Electronics (2.1%). Conversely, Hong Kong’s Hang Seng declined 0.7% to 25,635.23, Tokyo’s Nikkei 225 slipped 0.4% to 50,526.92, and Australia’s S&P/ASX 200 dropped 0.4% to 8,725.70.